But is the old contract still in effect ? If yes, then the profit selling his old phone probably doesn't cover the money he must paid for one year left of the old contract. That's why i'm confused.
Buy iPhone 3GS June 2009, Contract ends in June 2011. June 2010, sell 3GS, buy iPhone 4 and now contract ends 2012.
It is an early upgrade which requires you to sign a new two-year contract.